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Tuesday, May 3rd, 2022

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Spirit rejects US$3.6 billion offer, JetBlue now considering a hostile takeover bid

Spirit Airlines (Spirit) has rejected an offer of US$3.6 billion, US$33.00 per share, made by ultra-low-cost carrier JetBlue at the beginning of April this year. This offer is appreciably higher than the US$2.9 billon, then worth US$25.83 per share, cash and stock offer from Frontier Airlines (Frontier), announced in February this year. Spirit has chosen to continue negotiations with Frontier on the basis it considers the JetBlue merger would not get past antitrust regulations and therefore it is not worth considering.

As a counter to this, JetBlue has offered a US$200 million ‘compensation package’, US$1.80 per share, if the deal did not go through for antitrust reasons as a sweetener, which has also been rejected by the Spirit Board. JetBlue believes that the merger would produce savings of between US$600 million and US$700 million per annum once the merger was complete, enabling it grow in “focus cities” such as Los Angeles, Fort Lauderdale and Orlando in Florida, and San Juan, Puerto Rico, as well as in airports that are major hubs for the nation’s largest airlines, including those in Dallas, Houston, Chicago and Atlanta.

One of the principal reasons the Spirit Board feel the Frontier offer is more likely to pass antitrust regulations is that the two carriers have different regional strengths, while Spirit and JetBlue are both focused on the Eastern United States and, according to Cirium data, overlapped on 11% of routes during 2021. JetBlue is pushing to take on ‘the big four’ carriers, Delta, United, American and Southwest Airlines, which, combined, control approximately 80% of the U.S. passenger market.

"We believe a combination of JetBlue and Spirit has a low probability of receiving antitrust clearance so long as JetBlue's Northeast Alliance (NEA) with American Airlines remains in existence," Spirit said in a letter to JetBlue Chief Executive Robin Hayes on Monday, May 2.

After Spirit rejected the additional US$200 million compensation package, JetBlue issued a letter making it clear it was now considering a hostile takeover bid that it would take direct to Spirit shareholders. "While we would unquestionably prefer to negotiate a transaction with you, if you continue to refuse to constructively engage with us so that we can deliver this value to your stockholders, we are actively considering all other options available to us," the letter said. JetBlue also argues in the letter that the Spirit-Frontier deal also faces regulatory challenges and that if it does not go through, Spirit shareholders would get nothing as Frontier is not offering a fee for a failed bid.

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airBaltic wet leases one Ukraine International Airlines aircraft

Latvian airline airBaltic has agreed to wet lease one Ukraine International Airlines Boeing 737-900ER aircraft. Aircraft and its crew will perform flights within airBaltic's network short-term starting from May 1, 2022.

Martin Gauss, airBaltic Chief Executive Officer: “Ukraine International Airlines has been a reliable long-term partner of airBaltic. It is now a very challenging time for the Ukrainian people and their national airline. By temporarily wet leasing their aircraft, we are also providing short-term work to the employees of Ukraine International Airlines.”

Sergey Fomenko VP Commerce Ukraine International Airlines: “We would like to thank our very good partner and friend airBaltic for selecting Ukraine International Airlines as a capacity provider on an ACMI basis for its network. Especially now, when UIA temporarily cannot operate flights to and from Ukraine such an act of international aviation cooperation is very symbolic and important. UIA as IOSA certified carrier is ready to deliver high-quality service on routes of airBaltic.”

airBaltic has chosen to wet lease additional aircraft short-term due to impact caused by the global supply chain issues. Such a decision enables the company to ensure its planned flight schedule.

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Boeing reports increased stability and growth for aircraft finance sector

Boeing Capital Corporation, a wholly-owned subsidiary of Boeing has released the 2022 Commercial Aircraft Financing Market Outlook (CAFMO) showing improving financing stability as the industry recovers from the impacts of the global pandemic.

"Financiers and investors remain committed to the long-term fundamentals that continue to make aircraft a valuable asset class," said Tim Myers, president of Boeing Capital Corporation. "Despite the changing landscape since the emergence of the COVID-19 pandemic, the industry remains resilient and there continues to be sufficient liquidity in the market for our customers with increasing opportunities as traffic recovers."

The 2022 CAFMO reflects Boeing's near-term view of market dynamics and assesses financing sources for new commercial airplane deliveries.

"Industry fundamentals continue to show varying degrees of strength in different markets that reflect the regional trends of the global pandemic," Myers said. Selected highlights of the 2022 CAFMO include:

-For the second consecutive year, 100% of Boeing deliveries were financed by third parties with the top sources of delivery funding in cash, capital markets and sale leasebacks.

-The capital markets continued to play a key role in shoring up liquidity for the sector, with the market close to pre-pandemic levels for most issuers as spreads tightened throughout the year.

-Secured debt for lessors also made a return to pre-pandemic levels with the ABS market making a comeback with volumes at around US$8.7 billion, as lessors took advantage of the favourable rate environment.

-Although risk tolerance and activity levels were below pre-pandemic levels, pockets around the world are increasingly looking for business through bank debt.

-Institutional investors and funds continued to seek aviation exposure, filling in where traditional sources of capital retrenched.

-Export credit supported financing for Boeing aircraft contributed about 5% of total funding last year, primarily by the Export-Import Bank of the United States and with one deal supported by UK Export Finance.

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Embraer and Aernnova conclude strategic partnership agreement in Évora

Embraer and Aernnova have concluded the strategic partnership agreement announced in early 2022. Therefore, Aernnova now owns all shares of Embraer Metálicas and Embraer Compósitos, in an investment totalling approximately US$174 million.

For Embraer, this partnership is another opportunity to increase the production capacity of these two units, since besides supplying components for the company’s commercial, executive aviation and defence areas, there is the expectation of an increase in the production of components for other global aeronautical manufacturers. This implies more jobs in this inland region of Portugal, as well as a potential increase in exports. Thus, the factories in Évora also contribute to the increase of the aeronautical production capacity of Alentejo region and guarantee its position as a reference in the Aeronautical Cluster of Portugal. The agreement is also in line with Aernnova’s growth strategy, which further reinforces the company’s status as a global leader in the design and production of aerostructures, and it aims to increase the production capacity of the centres of excellence in Évora, whose operation is of strategic importance for Embraer’s current and future products.

With 500 employees, the Évora units produce, among other things, components for wings and vertical and horizontal stabilizers for Embraer’s aircraft programs such as the Praetor 500 and Praetor 600 executive jets, the two generations of the E-Jets family of commercial jets and the multi-mission aircraft KC-390 Millennium.

The industrial units in Portugal will constitute Aernnova’s largest production centres in the world. This agreement strengthens the Aernnova’s position as a tier 1 supplier for single aisle aircraft and improves its presence in the executive and defence aerospace markets. Évora facilities activity will add around US$170 million to Aernnova’s revenues figure. The capacity of these industrial units will also allow new contracts to be signed, either with Embraer or with other manufacturers.

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Kalitta Air commits to using ExxonMobil aviation lubricants across its fleet

ExxonMobil has announced that Kalitta Air will now use Mobil Jet™ Oil II and Mobil™ HyJet™ IV-Aplus across its entire fleet.

Kalitta Air, which currently uses Mobil Jet Oil II as well as Mobilgrease™ 33 and Mobilgrease™ 28 in its Boeing 777 freighter fleet, will commit to using Mobil Jet Oil II in its Boeing 747-400 freighter fleet and transition both to Mobil HyJet IV-Aplus. The airline cited the ability to streamline efficiencies in its procurement and maintenance departments as a key reason for transitioning to ExxonMobil aviation lubricants.

To meet customer demands, Kalitta Air needed solutions to boost efficiencies across its operations, which included lowering maintenance fees, increasing fuel efficiency and streamlining supply chain logistics. When assessing its lubricant inventory, Kalitta Air realised that consolidating to one supplier for its lubricant demands would help the airline realise increased cost savings that could support agile line maintenance.

Kalitta Air turned to Boeing Distribution (formerly Aviall) and ExxonMobil for inventory and supply chain analyses and product recommendations that would optimise efficiencies across its operation. Boeing and ExxonMobil were able to ease the procurement process for Kalitta Air by giving them one place to acquire all of the products they need.

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Delta TechOps, Asiana Airlines enter engine maintenance agreement

Delta TechOps will be a maintenance, repair and overhaul provider of Asiana Airlines’ CF6-80C2 engines over the next five years, bringing the engines powering the South Korean carrier’s Boeing 747 and 767 aircraft under its extensive global portfolio.

Delta TechOps people will expertly carry out scheduled engine overhaul shop visits during the five-year period. Additionally, Delta TechOps will support any unscheduled or AOG engine work.

As the maintenance division of Delta Air Lines, Delta TechOps has over 35 years of experience operating and maintaining CF6-80C2 engines. The work will be conducted by Delta TechOps Aviation Maintenance Technicians primarily at its Atlanta Technical Operations Centre.
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